Netscape sees no 'erosion' in browser share

CBS.MarketWatch.com

MOUNTAIN VIEW, Calif. (CBS.MW) -- Netscape's browser will remain a more popular choice for people looking to log onto the Internet than a rival offering from software giant Microsoft, the company said Tuesday.

During a conference call with reporters and analysts, Netscape (NSCP)
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released the "source code" of its pioneering Navigator browser. That will allow software developers to tailor browsers to their particular choice.

Since last January's announcement that Netscape will free its browser, "market share has been stable," said spokeswoman Rosanne Siino. "It's a good sign that people prefer our browser over (Microsoft's Internet) Explorer."

Netscape's share of the browser market has fallen from more than 90 percent less than two years ago to about 60 percent now. Although Goldman Sachs analyst Michael Parekh projects the share will fall a few more points, Netscape officials said Tuesday they don't see further "erosion".

The declining share of the browser market has dragged down Netscape shares. The market currently values the Mountain View, Calif.-based company -- which had sales of $534 million last year -- at about $1.7 billion, down from a high of $7.2 billion. On Tuesday afternoon, the stock dipped 11/16 to 18 3/16. The new version of Microsoft's Windows operating system, which is slated for a summer release, will integrate its browser into the core directions that power computers. However, the Justice Department has challenged the move.

Retaining its browser leadership is key for Netscape as a way to "feed" the company's two other businesses: Web-based operations and server and messaging software. Roughly 70 million Web surfers use or have used Netscape's browsers.

On the Internet side, Netscape attracts about 25 million visitors each month to its homepage, which some analyst say could makes the struggling company attractive to a stronger Internet company. Most of the traffic stems from the fact that Netscape uses its home page as the default home page for its browsers.

"As it stands now, the best the company can hope for is to to strike a deal with a Internet 'portal'," said Charlie Finnie, analyst at the San Francisco investment bank of Volpe, Brown, Whelan & Co. A "portal" refers to a lead-in site to the vast Internet, and Finnie identified Yahoo! (YHOO)
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, Infoseek (SEEK)
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and Lycos (LCOS)
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as possible partners.

"But even under the best of circumstances, I expect Netscape's financial results to continue to deteriorate and the stock price" to slide, he added.

Similarly, analysts are cautious about Netscape's prospects in the business software division, which generates about three times more revenue at Netscape than Web operations.

They point out business software is dominated by Microsoft and IBM, which could easily lose money for a number of years on these products if they wanted to undercut Netscape.

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